You are a lean machine. You take frequent Gemba walks, and you’ve read all Taiichi Ohno’s original texts. There is no waste in your system – both on the creative work you do and the implementation work that follows.
Does this sound like your firm?
If so, then your firm has some very powerful attributes – you can get stuff done. You pride yourself on execution, and execution that contributes quickly to the bottom line. You are ruthlessly focused and quickly remove any distractions.
The star leaders in your firm have learned the path well, finding carefully vetted new opportunities that lie close to the core business’ path and optimizing for them. Decision making is disciplined and risks are systematically removed.
When it comes time to grow, you prefer acquisitions. The risks are known, the business is already through the “messy” product market fit phase, and they have the kind of optimization issues you are great at solving.
And then it happens – a fast-growing adjacent firm begins to build huge valuations, and acquisitions are either really expensive or too small to make a material difference in your firm.
How it Looks from the Inside
I have had recent projects with established firms in retail, energy and manufacturing that share many attributes of the above profile. When the upstart firms first get rolling, you find some members of leadership concerned, but largely they see the upstarts as the “junior varsity” team that isn’t quite up to the task. This level of denial is what makes disruption predictable and possible.
While the leadership is in denial, these tensions create real tradeoffs for the team members in the firms. As I speak with them, it’s amazing how clearly they understand the emerging growth issue the firm faces. They have watched the culture of decision making being weighted to investments in the core, which after a certain point, create lower marginal returns. These team members feel the stagnation in the firm before it shows up on the P&L’s.
This places the firm in real danger of losing the very talent that can help build those organic projects to scale. With the talent shortage, the LinkedIn messages begin to show up, asking them if they’d like to have dinner and talk about something new. It frequently turns out that their skills could be more highly valued in the upstart’s business model than your own.
Commonly, there is also a board member who starts to look at the benchmarks and ask questions. This can create tension in the senior team to “seek innovation” that leads to some tasking of the strategic or financial planning team to develop some options.
The bad news, is that these tensions will persist until addressed – and these tensions consume talent, money and time.
The good news, is that there is a play book to address them.
It’s Time to Look Under the Hood
The journey to building a fresh line of business or service begins with a diagnosis – which you get through a well-structured process of gathering internal and external insights and facts. By looking under the hood, we can understand which portions of your powerful execution systems are a huge benefit when we present it with the right challenge. That right challenge starts with a deep look at a client centric issue, and then building a solution based on your capability. By using your strengths to establish the new offering, scale is more quickly achieved.
The work is structured discovery. We first talk to the key leaders, and then with their help and our experience, we collaborate to talk with the people (both inside and outside your firm) that have insights and ideas. We then package this into easily consumable documents that are used to circle back to the team leaders for additional insight.
Leaders are usually surprised at how much intelligence was not visible “below the water line” when the team was driving hard on the existing value proposition. We have a clear process for completing this work that we call the “Future Capability Process” (more here and here). Through this, we guide the group to deep internal insight, relevant external information and a strategic selection process.
The Magic is in the Collaboration
One major do differently is that you don’t have an individual or a team go offline and design something that is subsequently “change managed” into place (those are the insightful PowerPoints you find on the share drive that never went anywhere). When people are asked to onboard a new product or service without having “buy in,” resistance inevitably drags the process to a halt.
To get the kind of engagement you need to step into this challenge, you must build this change with the individuals that will be taking it forward.
And yes, because of the strength of your execution capabilities, your best Growth Leader talent – those who can find, form and finish a cross-functional project – will tend to stay tucked away in the product team at first. The challenge for leadership is to provide a path for these talented leaders to have the opportunity to work on the cross-business effort, where they can unlock some significant value and gain strong leadership muscle.
The good news is that we’ve seen it work – pragmatic team members who discovered that they could lead well, especially in those hard cycles when value propositions are being born.
Stepping Beyond Pragmatism to Adaptation
In this highly turbulent market, it is important to have two skills: execution and adaptation. Making an investment in the talent that will lead your firm beyond its current capability is a long-term annuity that will pay for itself many times over.
If you’d like to talk more, please give me a call at 847-651-1014, or set up a 20-minute chat using this link.
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